Data Pharoahs & Sufficiently Intelligent Algorithms
Relevance of Game Theory for Business
Who Buttoned My Waistcoat?
Presentation
2017
Patrick A. McNutt
Visiting Fellow, Manchester Business School, UK
& Smurfit Business School, Dublin, Ireland.
www.patrickmcnutt.com
Follow @tuncnunc
What is a Data Pharaoh?
The ‘likes’ on FB and Tweet buttons and Website Cookies contain codes that
track patterns
The patterns are shared or ‘brokered’ as information to companies by data
pharaohs
Human or machine
Focuses on behavioural targeting and programmatic buying
Male: shopping for chocolate & flowers: eXelate
Retail consumers shopping at Tesco: DunnHumby
App and location: Apple’s iBeacon
Instore matching and location: Indoor Atlas/Baidu
IBM Watson
What is a SIAL?
The Algorithm
Mathematical code to understand data by looking for data patterns
Small micro data sets to discover a pattern
To understand data and data patterns
Digital footprints:
online shopping habits to microbial signature of bacteria
What is a SIAL?
Sufficiently Intelligent Algorithm
Embeds mutual interdependence and
action-reaction chain of events into a First Order Differential Equation
Nudge plus time to repeat the pattern
Ultimately, you abandon unilateral decision making & acquire a game DNA
Game DNA?
Sufficiently Intelligent Algorithm
Rational ‘onsumers’ acquire a game DNA as they bid against themselves
ala fictional story of ‘Ralph’s Pretty Good Grocery’
‘if you can’t get what you want there you can probably get along without it’
The Optimism Bias: the future (t+1) will be much better than the past (t-1)
Stockdale Paradox: contradictory beliefs: Example
life couldn’t be worse now at t and life could be better at (t+1)
Law of One Price Violated
BIN price < END price
Game theory focuses on individual behaviour:
Game DNA
A game unfolds when there is both mutual interdependence and
action-reaction chain of events
Threat in the Data
Traditional: Firm A v Firm B Digital: Rational Consumer v SIAL
When you modify your behaviour you are enveloped by a game
Ultimately, rational individual abandons unilateral decision making
You either play to win (historically, a winning strategy ) or play not to lose
(maximin strategy)
From consumer to ‘onsumer’
1.
Outsourcing memory
2. Fast changing preferences:
Take-Away to Deliveroo to UberEats to
Amazon Drones
3. Precariat Workforce
4. Unwitting Thief: perceptions and
subjectivism (= personal experiences,
habitual behavior, momentary impulses)
the spectrum of irrational behavior
So game theory could transform your view
of consumers as ‘onsumers’
Allows you to filter habits & routines as
‘cumulatively unfolding process’ so as to
influence demand (smart strategy)
Data Asymmetry moving from SAL to SIAL
Premise: Prediction Depends on Asymmetries and
Finding a Pattern
Collect everything about ‘making scrambled eggs’ but the algorithm cannot make a
scrambled egg
SIAL can make a prediction but tell you neither what will cause the event nor why.
A game is like ‘a behavioural process, a sequence of actions and reactions at time period
t with consequences at time period t+1’
Lets take an example: The Daily Routine
Coffee stop 820am
Texting, FB and
‘Googling’ the
weekend plans.
‘Latte to go’ NFC
payment at 825am
walk to office
At office Log in PC
845
NFC at coffee shop
825
Smartphone Wake
Up 7am
Leave the house
725am
Transit Smartcard at
745am
Check text messages
Social media
At desk: 845am Log
On PC, search web. &
texting
925 Receive text
message confirm
lunch
1230 for lunch, CC
payment 13.45
1730 Log off PC;
Returning home,
smart card 1814; send
text; at home by 1855
surf the net, final texts,
web browsing.
Texting, surfing ‘lights
out’ by 23.55

Sufficiently Intelligent Algorithm (SIAL)
Focuses on (the roots of the tree):
WHY?
THEY ARE THE COGNITIVE KEY THAT DECODES
INDIVIDUAL BEHAVIOUR
BT+1 = BT + Δ
IN THE DAILY ROUTINE WE HAVE
Nudge zone: 8.20 - 8.25a.m
Daily Routine Algorithm:
Decision Tree
Signs and Patterns
Choices
For Coffee:
You prefer Costa &
SIAL knows that
Friend
SIAL
Costa
Happy Coincidence
Network Externality
Pattern: Predictable
SBUX
Opportunity Costs:
Chance Decision by
Friend
Nudge plus time
Cognitive Business Strategy
http://www.patrickmcnutt.com/news/game-ontology/
1. Thinking about moves or strategy
‘I think-you think-I think’
2. Signaling occurs in a game
Observe the playbook as patterns
Influence the patterns
Code the patterns
3. Visualisation of strategy: Covington McNutt or Humantific
Business Opportunities:
So game theory could transform your
view of a competitor
Allows you to shape strategy (smart
strategy)
WITH SIGNALING EVERYTHING IS CHANGING
What should I do? Reasonable or Rational
Behaviour?
With all the chaotic information available ‘what
you are’ and ‘who you are’ defines your Daily
Routine and algorithms convert it into
information = a valuable tradable asset, so
Stop and Think.
Know Your Pattern
Observe but do not judge.
WITH NUDGE PLUS TIME
EVERYTHING IS CHANGING
What should business do?
With all the chaotic information available ‘what you are’ and
‘who you are’ defines your Daily Routine and algorithms
convert it into information = a valuable tradable asset, so
Cloud storage: Box Inc, Trend Micro, MS Azure, IBM Cloud
Anti-Virus Software for Smartphones
Intelligent plants
VR
Net Neutrality
Thank you for listening………
‘Habit is a great deadner’
Samuel Beckett
Waiting for Godot Act II